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Brady Corporation Reports Fiscal 2019 Third Quarter Results and Increases its Fiscal 2019 EPS Guidance
Globe Newswire 23-May-2019 7:00 AM
Diluted EPS increased 32.7 percent to $0.65 in the third quarter of fiscal 2019 compared to $0.49 in the same quarter of the prior year.
Income before income taxes increased 10.8 percent to $41.0 million in the third quarter of fiscal 2019 compared to $37.0 million in the third quarter of fiscal 2018.
Sales for the quarter ended April 30, 2019 decreased 2.9 percent. Organic revenues increased 2.4 percent in the third quarter of fiscal 2019.
Diluted EPS guidance for the full year ending July 31, 2019 was increased to a range of $2.35 to $2.40 from the previous range of $2.25 to $2.35.
MILWAUKEE, May 23, 2019 (GLOBE NEWSWIRE) -- Brady Corporation (NYSE:BRC) ("Brady" or "Company"), a world leader in identification solutions, today reported its financial results for its fiscal 2019 third quarter ended April 30, 2019.
Quarter Ended April 30, 2019 Financial Results: Income before income taxes increased 10.8 percent, finishing at $41.0 million for the third quarter of fiscal 2019 compared to $37.0 million for the third quarter of fiscal 2018.
Net income for the quarter ended April 30, 2019, was $34.8 million compared to $26.0 million in the same quarter last year. Net income was impacted by a reduced income tax rate of 15.1 percent primarily due to certain audit settlements in the current quarter.
Earnings per diluted Class A Nonvoting Common Share were $0.65 for the third quarter of fiscal 2019, compared to $0.49 in the same quarter last year.
Sales for the quarter ended April 30, 2019 decreased 2.9 percent, which consisted of organic sales growth of 2.4 percent, a decrease in sales of 3.8 percent from foreign currency translation, and a decline in sales of 1.5 percent from the divestiture of a business during the fourth quarter of fiscal 2018. Sales for the quarter ended April 30, 2019 were $289.7 million compared to $298.4 million in the same quarter last year. By segment, sales increased 0.9 percent in Identification Solutions and decreased 12.2 percent in Workplace Safety, which consisted of organic sales growth of 4.0 percent in Identification Solutions and an organic sales decline of 1.6 percent in Workplace Safety.
Nine-Month Period Ended April 30, 2019 Financial Results: Income before income taxes increased 10.1 percent, finishing at $117.6 million for the nine-month period ended April 30, 2019, compared to $106.8 million in the same period last year.
Net income for the nine-month period ended April 30, 2019 was $94.6 million compared to $56.1 million in the same period last year. During the nine-month period ended April 30, 2019, net income was impacted by a reduced income tax rate of 19.5 percent primarily due to certain audit settlements in the current quarter. The prior nine-month period ended April 30, 2018 was impacted by tax charges of $21.1 million primarily related to the passage of the U.S. Tax Cuts and Jobs Act of 2017.
Earnings per diluted Class A Nonvoting Common Share were $1.78 for the nine-month period ended April 30, 2019, compared to $1.07 in the same period last year. During the nine-month period ended April 30, 2018, earnings per diluted Class A Nonvoting Common Share were reduced by approximately $0.40 from tax charges primarily related to the enactment of U.S. tax legislation.
Sales for the nine-month period ended April 30, 2019 decreased 1.3 percent, which consisted of organic sales growth of 3.1 percent, a decrease in sales of 2.8 percent from foreign currency translation, and a decline in sales of 1.6 percent from the divestiture of a business during the fourth quarter of fiscal 2018. Sales for the nine-month period ended April 30, 2019 were $865.4 million compared to $876.4 million in the same period last year. By segment, sales increased 2.1 percent in Identification Solutions and decreased 9.7 percent in Workplace Safety, which consisted of organic sales growth of 4.4 percent in Identification Solutions and an organic sales decline of 0.2 percent in Workplace Safety.
Commentary: "Our continued focus on organic sales growth through the development of innovative new products that generate value for our customers and solve their problems while providing strong customer service is working as we posted our eighth consecutive quarter of organic sales growth," said Brady's President and Chief Executive Officer, J. Michael Nauman. "Organic sales growth along with the execution of sustainable efficiency gains throughout our SG&A structure is once again the driver of our year-over-year pre-tax income growth. We remain committed to our investments in automation in our manufacturing facilities, our digital presence, and in the development of innovative new products. We're taking actions today that we believe will result in continued long-term improvement in our financial results and will drive shareholder value."
"Our balance sheet and cash position are strong. We have over $238 million of cash on hand and are in a net cash position of $188.1 million at April 30, 2019," said Brady's Chief Financial Officer, Aaron Pearce. "We generated $52.7 million of cash flow from operating activities this quarter, we invested $5.4 million in capital expenditures, and we returned $11.2 million to our shareholders in the form of dividends. Our balance sheet provides significant flexibility to invest in growth opportunities while returning cash to our shareholders through dividends and opportunistic share buybacks."
Fiscal 2019 Guidance: The Company is increasing its full year fiscal 2019 Earnings per diluted Class A Nonvoting Common Share guidance from its previous range of $2.25 to $2.35 to a range of $2.35 to $2.40. Included in this guidance is organic sales growth of approximately 3.0 percent, a fourth quarter income tax rate in the mid-20 percent range, depreciation and amortization expense of approximately $24 million, and capital expenditures of approximately $28 to $30 million during the year ending July 31, 2019. This guidance is based upon foreign exchange rates as of April 30, 2019.
A webcast regarding Brady's fiscal 2019 third quarter financial results will be available at www.bradycorp.com/investors beginning at 9:30 a.m. Central Time today.
Brady Corporation is an international manufacturer and marketer of complete solutions that identify and protect people, products and places. Brady's products help customers increase safety, security, productivity and performance and include high-performance labels, signs, safety devices, printing systems and software. Founded in 1914, the Company has a diverse customer base in electronics, telecommunications, manufacturing, electrical, construction, medical, aerospace and a variety of other industries. Brady is headquartered in Milwaukee, Wisconsin and as of July 31, 2018, employed approximately 6,200 people in its worldwide businesses. Brady's fiscal 2018 sales were approximately $1.17 billion. Brady stock trades on the New York Stock Exchange under the symbol BRC. More information is available on the Internet at www.bradycorp.com.
In this news release, statements that are not reported financial results or other historic information are "forward-looking statements." These forward-looking statements relate to, among other things, the Company's future financial position, business strategy, targets, projected sales, costs, earnings, capital expenditures, debt levels and cash flows, and plans and objectives of management for future operations.
The use of words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "should," "project" or "plan" or similar terminology are generally intended to identify forward-looking statements. These forward-looking statements by their nature address matters that are, to different degrees, uncertain and are subject to risks, assumptions, and other factors, some of which are beyond Brady's control, that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For Brady, uncertainties arise from: our ability to compete effectively or to successfully execute our strategy; Brady's ability to develop technologically advanced products that meet customer demands; difficulties in protecting our websites, networks, and systems against security breaches; decreased demand for our products; Brady's ability to retain large customers; extensive regulations by U.S. and non-U.S. governmental and self-regulatory entities; risks associated with the loss of key employees; divestitures and contingent liabilities from divestitures; Brady's ability to properly identify, integrate, and grow acquired companies; litigation, including product liability claims; Brady's ability to execute facility consolidations and maintain acceptable operational service metrics; foreign currency fluctuations; the impact of the Tax Reform Act and any other changes in tax legislation and tax rates; potential write-offs of Brady's substantial intangible assets; differing interests of voting and non-voting shareholders; Brady's ability to meet certain financial covenants required by our debt agreements; numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive, and regulatory nature contained from time to time in Brady's U.S. Securities and Exchange Commission filings, including, but not limited to, those factors listed in the "Risk Factors" section within Item 1A of Part I of Brady's Form 10-K for the year ended July 31, 2018.
These uncertainties may cause Brady's actual future results to be materially different than those expressed in its forward-looking statements. Brady does not undertake to update its forward-looking statements except as required by law.
BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; Dollars in thousands, except per share data)
Three months ended April 30,
Nine months ended April 30,
2019
2018
2019
2018
Net sales
$
289,745
$
298,421
$
865,367
$
876,352
Cost of goods sold
143,996
147,339
433,269
435,513
Gross margin
145,749
151,082
432,098
440,839
Operating expenses:
Research and development
11,437
11,678
33,837
33,512
Selling, general and administrative
94,691
101,695
281,988
299,411
Total operating expenses
106,128
113,373
315,825
332,923
Operating income
39,621
37,709
116,273
107,916
Other income (expense):
Investment and other income
2,065
31
3,425
1,303
Interest expense
(708
)
(761
)
(2,137
)
(2,453
)
Income before income taxes
40,978
36,979
117,561
106,766
Income tax expense
6,197
10,979
22,916
50,657
Net income
$
34,781
$
26,000
$
94,645
$
56,109
Net income per Class A Nonvoting Common Share:
Basic
$
0.66
$
0.50
$
1.80
$
1.09
Diluted
$
0.65
$
0.49
$
1.78
$
1.07
Dividends
$
0.21
$
0.21
$
0.64
$
0.62
Net income per Class B Voting Common Share:
Basic
$
0.66
$
0.50
$
1.79
$
1.07
Diluted
$
0.65
$
0.49
$
1.76
$
1.05
Dividends
$
0.21
$
0.21
$
0.62
$
0.61
Weighted average common shares outstanding (in thousands):
Basic
52,766
51,747
52,499
51,628
Diluted
53,480
52,729
53,215
52,610
BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
April 30, 2019
July 31, 2018
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
238,432
$
181,427
Accounts receivable—net
162,094
161,282
Inventories
119,895
113,071
Prepaid expenses and other current assets
18,746
15,559
Total current assets
539,167
471,339
Property, plant and equipment—net
99,491
97,945
Goodwill
412,378
419,815
Other intangible assets
38,135
42,588
Deferred income taxes
7,068
7,582
Other
19,638
17,662
Total
$
1,115,877
$
1,056,931
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
64,584
$
66,538
Wages and amounts withheld from employees
52,849
67,619
Taxes, other than income taxes
7,886
8,318
Accrued income taxes
4,378
3,885
Other current liabilities
48,169
44,567
Total current liabilities
177,866
190,927
Long-term obligations
50,303
52,618
Other liabilities
63,164
61,274
Total liabilities
291,333
304,819
Stockholders' equity:
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 49,284,372 and 48,393,617 shares, respectively
513
513
Class B voting common stock—Issued and outstanding, 3,538,628 shares
35
35
Additional paid-in capital
330,051
325,631
Retained earnings
612,474
553,454
Treasury stock—1,977,115 and 2,867,870 shares, respectively, of Class A nonvoting common stock, at cost
(50,083
)
(71,120
)
Accumulated other comprehensive loss
(68,446
)
(56,401
)
Total stockholders' equity
824,544
752,112
Total
$
1,115,877
$
1,056,931
BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
Nine months ended April 30,
2019
2018
Operating activities:
Net income
$
94,645
$
56,109
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
17,836
19,047
Non-cash portion of stock-based compensation expense
10,311
7,581
Deferred income taxes
3,796
26,501
Changes in operating assets and liabilities:
Accounts receivable
332
(10,710
)
Inventories
(9,254
)
(7,790
)
Prepaid expenses and other assets
(2,204
)
480
Accounts payable and other liabilities
(19,176
)
(133
)
Income taxes
616
(1,863
)
Net cash provided by operating activities
96,902
89,222
Investing activities:
Purchases of property, plant and equipment
(17,528
)
(14,755
)
Other
(1,810
)
(197
)
Net cash used in investing activities
(19,338
)
(14,952
)
Financing activities:
Payment of dividends
(33,488
)
(32,110
)
Proceeds from exercise of stock options
20,333
10,011
Proceeds from borrowing on credit facilities
13,637
17,439
Repayment of borrowing on credit facilities
(13,568
)
(69,012
)
Other
(5,185
)
(3,622
)
Net cash used in financing activities
(18,271
)
(77,294
)
Effect of exchange rate changes on cash
(2,288
)
(17
)
Net increase (decrease) in cash and cash equivalents
57,005
(3,041
)
Cash and cash equivalents, beginning of period
181,427
133,944
Cash and cash equivalents, end of period
$
238,432
$
130,903
BRADY CORPORATION AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited; Dollars in thousands)
Three months ended April 30,
Nine months ended April 30,
2019
2018
2019
2018
NET SALES
ID Solutions
$
213,979
$
212,154
$
641,283
$
628,291
Workplace Safety
75,766
86,267
224,084
248,061
Total
$
289,745
$
298,421
$
865,367
$
876,352
SALES INFORMATION
ID Solutions
Organic
4.0
%
3.7
%
4.4
%
3.7
%
Currency
(3.1
)%
4.1
%
(2.3
)%
3.0
%
Total
0.9
%
7.8
%
2.1
%
6.7
%
Workplace Safety
Organic
(1.6
)%
1.7
%
(0.2
)%
(0.1
)%
Currency
(5.3
)%
7.4
%
(3.7
)%
5.7
%
Divestitures
(5.3
)%
—
%
(5.8
)%
—
%
Total
(12.2
)%
9.1
%
(9.7
)%
5.6
%
Total Company
Organic
2.4
%
3.2
%
3.1
%
2.7
%
Currency
(3.8
)%
5.0
%
(2.8
)%
3.6
%
Divestitures
(1.5
)%
—
%
(1.6
)%
—
%
Total
(2.9
)%
8.2
%
(1.3
)%
6.3
%
SEGMENT PROFIT
ID Solutions
$
39,892
$
36,970
$
119,311
$
106,896
Workplace Safety
6,099
7,537
16,301
21,037
Total
$
45,991
$
44,507
$
135,612
$
127,933
SEGMENT PROFIT AS A PERCENT OF NET SALES
ID Solutions
18.6
%
17.4
%
18.6
%
17.0
%
Workplace Safety
8.0
%
8.7
%
7.3
%
8.5
%
Total
15.9
%
14.9
%
15.7
%
14.6
%
Three months ended April 30,
Nine months ended April 30,
2019
2018
2019
2018
Total segment profit
$
45,991
$
44,507
$
135,612
$
127,933
Unallocated amounts:
Administrative costs
(6,370
)
(6,798
)
(19,339
)
(20,017
)
Investment and other income
2,065
31
3,425
1,303
Interest expense
(708
)
(761
)
(2,137
)
(2,453
)
Income before income taxes
$
40,978
$
36,979
$
117,561
$
106,766
For More Information: Investor contact: Ann Thornton 414-438-6887 Media contact: Kate Venne 414-358-5176
